Report from Michigan Elder Justice Initiative and The National Consumer Voice for Quality Long-Term Care
Public Funds into Private Pockets: How Nursing Homes May Be Hiding Profits and Depriving Residents of Care and Quality
2025-06-04
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Executive Summary
Nationally, Medicare and Medicaid pay nursing homes nearly $70 billion each year to provide care to nursing home residents. Despite that funding, too often nursing home residents receive such poor care that it imperils their health and safety. However, when nursing home owners are confronted with the quality of care in their nursing homes, they often reply that they do not receive enough money to provide high-quality care or better staffing.
Recently, however, more attention has been paid to how nursing homes use taxpayer dollars. Members of Congress sent a letter to several nursing home chains, questioning why their nursing homes were staffed so poorly when they were spending hundreds of millions of dollars on stock dividends, buybacks, and bonuses. One particular practice that has drawn scrutiny is the use of related party transactions to tunnel, or hide, profits. A recent study found that the average nursing home uses this practice to hide hundreds of thousands of dollars in profits each year.
A related party is a company that does business with a nursing home and has common ownership or control with the nursing home. In simpler terms, one person or company owns both companies. A 2023 study found that nationwide, in 2019, nursing homes paid related parties $11.23 billion. Overall, 9.54 percent of nursing homes’ total net operating revenues were paid to related-party organizations.
In a 2024 study, Drs. Ashvin Gandhi and Andrew Olenski analyzed Illinois
Medicaid cost reports and estimated that the average nursing home uses
related party transactions to hide hundreds of thousands of dollars in profits each year. They determined that for-profit nursing homes’ use of related party companies is “substantial and widespread.” Our analysis of federal Medicare cost reports found that in Michigan, during the years 2021-2023, nursing homes paid nearly $1.2 billion to related party companies.
Despite paying nursing homes tens of billions of dollars annually, the federal government and many states fail to require transparency and accountability for how Medicare and Medicaid dollars are spent. Current Medicare and Medicaid cost reporting systems do not require adequate disclosure of expenditures, particularly related party transactions. A 2024 Report by the US Office of Inspector General found that for Medicare cost reporting periods ending during FYs 2015 through 2020, skilled nursing facilities (SNFs) reported receiving a total of $160.4 billion in Medicare payments and paying a total of $65.4 billion to related parties. The report concluded, “Medicare administrative contractors (MACs) did not review, as part of their oversight activities, the disclosure or
reporting of related parties and their costs, and CMS did not provide sufficient guidance to SNFs that explained how to determine Medicare-allowable related-party costs.” This report focuses on the lack of transparency and accountability, particularly for related party transactions, in Michigan. It scrutinizes the financial reports of four for-profit nursing home chains — Ciena Healthcare, Mission Point Healthcare Services, SKLD, and Villa Healthcare — and demonstrates how the quality of care is inadequate in these chains.
These corporations were selected because they each operate more than 10
nursing homes, have a history of providing substandard care, and the cost
reports for the homes they operate document substantial related party
transactions. For comparison, this report will frequently contrast the care
quality in these chains to non-profit homes in Michigan. This report concludes with recommendations that will increase transparency in how taxpayer dollars are spent and help hold nursing homes accountable for using taxpayer funds to provide residents with both quality of care and quality of life.
When nursing homes use financial strategies that siphon money away from
resident care, it affects facility staffing and every aspect of residents’ quality of life. Money diverted to profits results in lower wages and poorer working conditions, which translates into high staff turnover and staff shortages. Staff report that the frequent practice of being mandated to work overtime (to stay on for a second shift because there is no one to relieve them) causes health, mental health, and childcare challenges.
Staffing challenges have a profound impact on residents since high quality care results, in large part, from having sufficient staff to complete the myriad tasks residents need help with every day. Local long-term care ombudsmen in Michigan and Health Inspection reports have documented that residents:
- Have to wait hours for assistance,[13]
- Get bathed as little as once a month, and[14]
- Cannot get the help they need to eat their meals[15]
Moreover, artificially tight budgets can result in insufficient quantity and quality of food for residents, lack of basic supplies and durable medical equipment, lack of transportation and activities, and a host of other challenges
Some residents have resorted to calling 911, not for emergencies, but because they cannot get the routine assistance they need. In response to a significant spike in these calls, at least one Michigan municipality passed an ordinance that imposes fines on nursing homes and other senior residential facilities for requests by residents for non-emergency assistance. The Sterling Heights ordinance explains the fines are necessary because of “a lack of facility staffing, a disinterest by the facility in addressing these needs for their residents, a lack of proper equipment at the facility, or other reasons that do not warrant or justify the use of city emergency responder resources.”
2025-06-03 Spotlight
Many nursing homes feed residents on less than $10 a day: ‘That’s appallingly low.
NJ Advance Media/NJ.com, May 22, 2025 (updated)
By Ted Sherman, NJ Advance Media for NJ.com, Susan K. Livio, NJ Advance Media for NJ.com, and Matthew Miller | mmiller@mlive.com
This article reveals a widespread issue of inadequate food spending and poor food quality in U.S. nursing homes, often driven by cost-cutting measures, particularly in facilities owned by private equity firms. An investigation, aided by Rutgers University and data experts reviewing federal cost reports, found that nationwide, more than a quarter of all nursing home operators spent under $10 a day per resident for food in 2023—less than the cost of a fast-food meal. Some owners even budgeted as low as $6 per day.
This minimal spending leads to numerous problems:
- Poor Quality & Insufficiency: Residents report receiving shockingly small portions (like a single ravioli for a meal), unappetizing, or even inedible food (“soup and a sammie” with one slice of bologna and cheese). Complaints include rancid meat, spoiled produce, and meals prepared in filthy conditions. Many residents, even when meals meet basic nutritional quantity, find nothing appetizing. Some reported going a day without food.
- Health Consequences: Malnutrition and dehydration are rampant, with studies showing rates between 30% and 85% in residents. Inadequate nutrition contributes to poor health outcomes and even early death. Lack of specific dietary needs, like potassium-rich bananas for a stroke patient, was also noted.
- Rising Issues: From 2021 through 2024, food-related deficiency citations nearly tripled. Dietary complaints to ombudsman offices increased by over 50% between 2020 and 2023, and outbreaks of foodborne illnesses tied to nursing home kitchens are also on the rise.
- Lack of Regulation: There are no federal or state regulations mandating minimum spending on food, making it an easy target for cuts. Experts note that when facilities are forced to increase spending in one regulated area (like staffing), they often cut costs in unscrutinized areas like food.
The article contrasts these low food budgets with the high cost of nursing home care (median annual cost of $104,000 for a semi-private room). While industry officials state their commitment to quality care and blame underfunding and inflation, advocates and experts like Sam Brooks, David C. Grabowski (Harvard), and Charlene Harrington (UCSF) describe food as a major source of complaints and a significant, under-addressed problem. Cases like the collapse of Skyline Healthcare, whose owner Joseph Schwartz was convicted of tax fraud after allegedly skimming profits while facilities cut corners on essentials like food, highlight how financial motives can severely impact resident care.
Ultimately, the piece underscores that food is crucial not just for physical health but also for the mental well-being and dignity of residents, for whom meals can be a “bright spot” in their day. However, it often becomes an “easy place for a company to cut corners.”
Inside the ‘multibillion-dollar game’ to funnel cash from nursing homes to sister companies
NJ Advance Media/NJ.com, May 1, 2025 (updated)
By Ted Sherman, NJ Advance Media for NJ.com, Susan K. Livio, NJ Advance Media for NJ.com, and Matthew Miller | mmiller@mlive.com
This article details how many U.S. nursing homes utilize complex financial structures, particularly related-party transactions, to allegedly siphon funds intended for resident care, thereby boosting owner profits while facilities often remain understaffed and under-resourced.
A key example highlighted is South Jersey Extended Care, dubbed one of New Jersey’s worst. Acting State Comptroller Kevin Walsh moved to bar it from Medicaid, accusing its operators of a “massive scam” by siphoning millions through side businesses controlled by the same individuals. Money that should have gone to resident care was allegedly diverted to owner distributions and inflated “consulting” fees.
The practice, sometimes called “skimming” or “tunneling,” involves nursing homes paying related companies (often owned by the same people) for services like rent, management, or supplies, frequently at inflated prices. While industry representatives from organizations like the American Health Care Association argue these arrangements are legal, common across industries, and sometimes necessary due to inadequate Medicare/Medicaid reimbursements, critics and studies suggest they obscure true profits and harm care.
Key findings and concerns raised in the article include:
- Prevalence: About 78% of U.S. nursing homes operate multiple entities with related owners.
- Hidden Profits & Inflated Costs: Economists estimate 63% of nursing home profits in 2019 were hidden via inflated transfer prices to related parties. These transactions can increase a facility’s stated costs for services like real estate and management by 20-25%. In 2023, nursing homes reported paying related businesses $2.76 billion over and above what was listed as “allowable costs” for those services.
- Impact on Care: Facilities engaging in these practices tend to have fewer staff, higher rates of patient injuries, and more complaints. The tragic case of Ronald Wysong, who choked to death in an Ohio facility, is cited in a lawsuit alleging the parent company extracted money through management fees while under-resourcing the home.
- Lack of Transparency & Oversight: It’s difficult to track where money truly goes. While disclosed in federal cost reports, these are hard for the public to access and parse. The HHS Inspector General found facilities failing to report related parties or properly adjust costs, and criticized CMS for insufficient guidance. Routine inspections are also lagging, with over 20% of homes behind on annual inspections, partly due to underfunding and understaffing at state and federal levels.
The article concludes by outlining potential solutions, such as federal standards for spending on food and administration, limits on profits, random audits by CMS, and improved inspections. However, advocates like NJ Comptroller Kevin Walsh describe the effort to prevent financial diversions as a “multibillion-dollar game of Whac-a-Mole,” with greed at the problem’s core.